On 19th December 2017 the EU Commission (“Commission”) issued its decision in relation to the tonnage tax regime applicable in Malta, conditionally approving the compatibility of the said regime with EU State aid rules for a period of ten years.

"Tonnage tax systems are meant to promote the competitiveness of the EU shipping industry in a global market without unduly distorting competition. I am pleased that Malta committed to adapt its tonnage tax system to achieve this. Moreover, by encouraging the registration of ships in the EU, the scheme will enable the European shipping industry to keep up its high social and environmental standards”.

This decision comes after the Commission’s five-year in-depth investigation into the Maltese tonnage tax scheme to examine its compatibility with EU State aid rules. The Commission found that certain aspects of the Maltese tonnage tax regime, such as its broad application to a wide range of shipping activities, may be in breach of State aid rules.

The Maltese government has committed to introduce a number of changes to its scheme to prevent any discrimination between shipping companies and to avoid undue competition distortions. In particular, Malta agreed to restrict the scope of the scheme to maritime transport and to remove those tax exemptions for shareholders which constitute State aid.